Good Example Of Research Paper On Banner Health
The business model for Banner Health is a non-profit health organization. The organization operates twenty hospitals and other health facilities. Although the aim of the organization is not to make profit, it is important that the organization earn enough revenues to keep its operations running and help in achieving the organizations main objectives. Donors and sponsors support the organization. This enables it to provide health services to the community free of charge. However, the organization also offers some services for a fee. Due to the economic downturn, the number of donors and sponsors has reduced drastically.
As a result, the organization has to try to make more clients use the paid for services. This is reflected in the strategic goals of the company. These are divided into both short-term and long-term goals. The short-term goals should be achieved by the end of the first two years while the long-term goals should be achieved by the fourth year. The company aims to increase its footprints by acquiring hospitals, which will result in an annual 5% increase in outlets. The company also intends to raise its revenue generation by 20%. The company intends to increase the number of patients attended to by 20%. In the long term, the organization aims to construct a research center in every state of operation. It also aims to open at least one health center in every state in the United States. Finally, the company would like to increase revenue by at least 50% every year.
The organization plans to increase the number of its outlets by at least 5% annually. Currently, this means the organization will have to open one health center or one hospital per annum. The cost of opening a health center is $2,500,000 while that of opening a hospital is $7,000,000. A hospital has 60% better returns than a health center and has 70% more patient traffic than a health center. The organization has projected profits of $ 6.3 million in the first year of the strategic plan. This means that the company will be some funds short of opening a hospital within the financial year. They can therefore concentrate their efforts on opening a health center. This added cost will be important as it still enables the company to meet its strategic goals of opening more outlets and attracting more customers. After the second year, the organization can now use the profits to open up a hospital each year as the hospital has a better return on investment (Verheijde, 2006).
The economic downturn has resulted in a situation where there are fewer donors and sponsors available. This led to a situation where the organization had to look for alternative sources of revenue. This has led to the organization attempting to increase the number of outlets, and consequently the number of patients paying to use the paid for services offered by the organization. The economic recovery and it is expected that donor and sponsor funds will increase. The projected increase in revenue per year is 20%. This comes from expected annual increase in donor, sponsor revenue as a result of economic revival, and paid for services as a result of the increased availability and marketing done by the organization.
The annual increase in revenue is expected to remain marginally higher than the annual increase in expenses. The biggest expense for the company is salaries, which are expected to remain, capped at 65% of total revenues. Considering the annual salary increase of 4%, this figure will remain manageable for the organization. The more outlets it opens, the more employees it will need. However, additional revenues from the new outlets will cover the salary costs for these employees. Marketing costs for the organization are also expected to rise as the strategic plan progresses. This is because to obtain the fifty percent increase in revenue by the fourth year, the organization will have to increase the number of clients using its facilities at a constant rate of 20% per annum.
The organization has an advantage because of its free service to the community. As a result, it has a very large customer base that uses the facilities. However, in order to increase the revenue earned, they will have to be made aware of the paid for services. This is important as the same clients who use the organization’s free services are also likely to use its paid for services (Cleverley, Cleverley & Song, 2011). The supplies expenses are expected to rise by 10% per annum. This is because the increased number of outlets will require more supplies. This has to be considered in the budget, as it is the second biggest expense for the organization. The estimates for other expenses such as maintenance and miscellaneous are expected to grow steadily at 1% per annum each.
There is always a danger that the current economic revival could fade and donor and sponsor funds would reduce. If this were to be the case, the projected revenue for the organization would be significantly lower. The company has a contingency plan in case of such an eventuality. The company holds close to $6,000,000 in its accounts from previous profits. These funds would be used to accelerate the opening of new outlets to increase the revenue base of the organization. If the donor funding were to fall significantly, the organization would also have to reduce some of its free offerings to the community. This would be carried out for a period that is only as long as necessary before the paid for services can bring in enough revenue to support resumption of free services.
Some financial adjustments were made from the way the organization planned its finances in the past. There was an increase in the increase in revenue and increase in supplies expenses estimations. These adjustments were made because the company intends to open new outlets within the strategic period. This would have a direct impact on revenues earned and on the supplies used. There was also the inclusion of the $6,000,000 cash in bank that the company holds for contingency measures. The economic environment is unpredictable at the moment and these funds would enable the organization to cope with any unforeseen circumstances in the short term (Penner, 2004).
The company has a strong financial base. However, only 48% of revenues are raised by income generating activities of the organization. This is bad for the organization. Ideally, this figure should be close to 70%, which would make the organization less dependent on donors and sponsors. This has affected the financial plan because many resources have to be allocated to new outlets in order to increase patient traffic and subsequently revenues. This would enable the organization to achieve its objectives of being self-reliant (Gapenski, 2009).
Cleverley, W. O., Cleverley, J. O., & Song, P. H. (2011). Essentials of health care finance. Sudbury, Mass: Jones & Bartlett Learning.
Gapenski, L. C. (2009). Fundamentals of healthcare finance. Chicago: Health Administration Press.
Penner, S. J. (2004). Introduction to health care economics & financial management: Fundamental concepts with practical applications. Philadelphia, Penns: Lippincott Williams & Wilkins.
Verheijde, J. L. (2006). Managing care: A shared responsibility. Dordrecht: Springer.